Escalation of freight charges, inimical to trade development

Freight Containers On A Container Ship At DP World, Southampton Docks.jfif Freight containers

Fri, 22 Oct 2021 Source: Joe Effah-Nkyi

The sudden escalation in CIF freight component of final Customs duty assessment of general imports into the country as announced by the Deputy Minister of Trade, Frederick Adom-Obeng on behalf of the substantive Minister has unexpectedly sent ‘shivers down the spine’ of potential investors, local importers as well as industry players.

These in addition to the various stakeholders who have over the years, made tremendous contributions to the sustenance of Ghana’s unpredictable economy.

It would be recalled that the unfortunate civil war that erupted in neighboring Cote Di Voire, a couple of years ago, saw most shipments destined for that country deflecting to neighboring Ghanaian seaports. In those highly difficult moments, the massive diversion, by some means, became a blessing to our sovereignty because it physically culminated into an improved transit trade regime and sudden soaring of the country’s revenue mobilization injections, thereby, making the country a wee-bit competitive in the global maritime and logistics hub.

Obviously, there was no doubt that the country indisputably benefited immensely from value addition in the country’s socio-economic progression.

However, at the tail end of the civil hostilities in Cote Di Voire, vessels bound for that country, but as usual, awaiting at the strategically defined quay perimeter in the Ghanaian breakwaters with the intention to berth for final discharge of stowage, were coaxed to ‘return home’.

At this juncture, the best policy option to deal with the situation head-on was for GPHA to mitigate port revenue charges of imports in order to persistently retain these shipping lines together with the associated investors to guarantee inflow of imports and a further boost in revenue mobilization.

In this connection, the only action GPHA could embark on was rather to initiate an irrational increase in handling charges on all transit cargo and goods passing through the Ghanaian seaports. Readers, within a ‘twinkle of an eye’ of this antagonistic directive, prospective vessels with transit cargo meant for Cote Di Voire but gearing up to berth at the Ghanaian ports suddenly ‘vamoosed’, returning to the old base of the port of Abidjan.

This country ultimately ended up losing greatly prudent opportunities that could have increased the country’s much-cherished revenue inflows and helped address the consequential youth employment challenges that have been a bane on Ghana’s developmental trajectory.

Bench Mark Values

The above notwithstanding, we are again confronted with another unfortunate policy prescription in respect of Benchmark values applicable in customs duty/taxes payment. In the year April 2019, the Government publicized a 50% drastic reduction in the benchmark values against which customs duty paid by importers at Ghana’s ports are calculated.

The measure was intended to reduce the menace of smuggling and make the country’s ports exceedingly competitive and attractive under a paperless regime.

Now, just two years down the line, i.e. approximately a month ago, there was the sudden introduction of another hostile customs-related duty directive. This time around, the freight component of CIF of imports that are utilized to compute final Customs duty/taxes had surprisingly been uplifted. It, therefore, means that there is an increase in final customs duty payment, which has clandestinely been implemented on the ‘quiet’, to the chagrin of both the business and import community and the country at large.

Nonetheless, from the look of things, there is no doubt that this sudden upliftment is a result of government’s inability to reverse the Benchmark values to 100%, (which in effect is likely to receive public resentment, anyway). i.o.w the government’s strategy had been to covertly ‘sneak’ the 50% benchmark reduction into the freight component of the CIF to wholly achieve the 100% duty payment, someway somehow.

In the light of the above, most authorities in the maritime and logistics industry, which indisputably includes the totality of the business community, are of the opinion that, the above-enumerated key scenarios are clear cases of policy inconsistencies.

Such irregularities could obviously, destabilize the country’s transactional trade framework, which may eventually lead to endangering much-expected revenue inflows and ultimately eradicate business confidence the state is supposed to enjoy.

Columnist: Joe Effah-Nkyi